UAV and Allumination integrated into Content
LONDON — ContentFilm is taking a big step into the U.S. DVD distribution business in partnership with veteran studio execs Kerry McCluggage and Jeff Sagansky.
In a complex transaction, Content has agreed to acquire the home video assets of UAV Corp. for $7 million cash, and will buy Sagansky and McCluggage’s video company Allumination FilmWorks for $4.5 million in newly issued Content shares.
Sagansky and McCluggage, who are providing some bridging finance for the deal, will end up with a 15% stake in Content, with McCluggage serving as CEO of the merged U.S. video operations.
The net effect of the deal will give Content a DVD distribution operation that combines the sell-through strength of UAV with Allumination’s robust rental business.
UAV specializes in children’s and family videos at budget prices, sold predominantly via Wal-Mart stores. Allumination owns nearly 200 theatrical movies and over 4000 hours of TV programming, music specials and children’s titles.
Content, which is listed on London’s Alternative Investment Market, started out as a New York-based production company, but has reinvented itself over the past couple of years as an international film and TV sales company. In 2005 it pulled out of film production and acquired the Fireworks TV library.
“We look forward to integrating UAV and Allumination into our company with the same success that we experienced with Fireworks,” said Content chief exec John Schmidt. “This deal demonstrates that we are continuing our strategy of acquiring entertainment rights on attractive terms, while building sales and marketing teams that can turn those rights into revenues, cash flows and profits.”
“The new business of Allumination will be a strong fit with the ongoing growth plans at ContentFilm,” commented McClug-gage.
McCluggage, the former chairman of Paramount TV Group, and Sagansky, who was formerly president of TriStar Pictures, president of CBS Entertainment and president/CEO of Paxson Communications, acquired small stakes in Content last year, but will both become significant shareholders as a result of the latest deal.
Content has formed a joint venture with the duo to acquire the UAV assets, with Content contributing $4 million and Sagansky and McCluggage putting up the remaining $3 million.
But once it has rolled the acquisition into its existing corporate loan facility, Content will buy out Sagansky and McCluggage’s share in the joint venture for $3 million plus interest, leaving Content as the sole owner of the UAV assets.
At the same time, Content will buy Allumination from Sagansky and McCluggage for $4.5 million in new Content stock.
UAV’s home entertainment assets generated revenues of around $30 million in 2005, and a further $10 million in the first quarter of 2006. Allumination reported sales of $4 million last year, and is forecasting sales of $10 million in 2006.
Content will report its financial results July 4, but its revenues for the past year are expected to be around $20 million.